Dial-up life support to switch off

Small and medium businesses have taken over from large businesses as the biggest driver of internet access in South Africa, says Arthur Goldstuck, managing director of internet research company World Wide Worx.

This is largely as a result of small businesses switching from slow dial-up internet connections to faster, multi-user ADSL lines.

According to World Wide Worx’s Internet Access 2008 report, released at the end of last year, the growth in the number of internet users in South Africa “has come largely on the back of dramatic take-up of broadband offerings by small businesses, which alone accounted for half of the growth in the market”.

“Our research shows that every SME using ADSL is connecting between one and 20 additional individuals to the internet,” says Goldstuck.

ADSL and 3G broadband users grew more than 50% in 2008 and the total number of internet users in South Africa by 12.5% to 4.6-million.

The report predicts that dial-up will be brain dead within three months and that life support will be switched off in the next four years. “We are seeing a broadband culture emerging in South Africa, held back only by the restrictions still placed on data capacity,” the report reads. “These should start becoming a non-issue from the middle of 2009, as the first of the major new undersea cables [Seacom] enters operation. At that point, dial-up will effectively be dead as a connectivity option”.

Goldstuck, however, cautions that the price of internet connectivity won’t fall immediately. Rather, businesses can expect data caps to rise first. Prices are likely to fall gradually over the next two to three years.

But businesses have more to watch out for than just the price. Goldstuck stresses the cultural effect of access to broadband. A new internet user will start off using basic internet functions such as email and perhaps internet banking. Then, in what Goldstuck calls the “experience curve”, they start using higher-end functions such as online shopping. “The average user has to have been online for more than five years or more before they are comfortable with spending online.”

What this means for businesses is that the massive growth of internet users will echo in a boom in online retail five years from now.

Last year, online retail sales passed the R1-billion mark for the first time after a critical mass of online shoppers was reached in 2006, says Goldstuck. “It should grow another 20% this year, even with the economic slump.”